Mihai Budiu’s Blog

Updated: fixed a broken link.

I read a very interesting business book about how great companies are built.  (I am not the only one, the cover boasts "more than 1 million sold.")  The book is "Built to Last: Successful Habits of Visionary Companies."  I am providing the Amazon link, but you can also find a brief description at wikisummaries.  I liked the book because the authors — who are current or ex- academics from the Stanford school of Business — claim convincingly that their analysis is driven by data.  The methodology employed was as follows: the authors have first identified 18 "great" companies, using a survey.  These are companies that have thrived for a very long time, more than 100 years for most of them.  Then the authors set-up a control group, which contains similar companies, but slightly less successful.  Then the authors attempt to find a set of recipes that stand behind the great companies.  The data collection and analysis took 6 years.  Not surprising, taking into account that they had to dig into archives older than 150 years sometimes.

The results are quite surprising, and I highly encourage you to read the book for details.  The one-line summary (which you won’t find in the book in this form) is that all such great companies are really organized a lot like religious organizations.  (This great observation is due to Martin Abadi.)

But one thing that struck me while reading the book is that I recognized a lot of the traits of these organizations in the way Google seems to be structured.  My personal hypothesis is that the founders of Google have actually read this book carefully (it was published in 1996), and they set up deliberately to create a company which would follow the recipe in the book, and thus would be destined to become "great."  The way their stock and revenues has been working, they seem to have been vindicated, but it is way too soon to give a verdict.

Here I want to point out some of these striking similarities.

• A great company should have a core value, which it preserves no matter how many mutations it suffers.  Clearly, I am thinking about "Do no evil."
• The company should be driven by "big, hairy, audacious goals."  Goals like the moon landing, which motivate and drive for a long time, but are reachable.  (These are not the same as the core value.)  What else but "organize the world’s information?"
• The company ideology should be more than just profits.  In fact, short-term profit should be secondary to pursuing the long-term goals.  Doesn’t this fit with the lack of financial guidance offered by Google?
• Create a cult-like organization, which draws a clear line between the insiders and the outsiders.  There is a lot to quote here, from the free meals and other perks, which are designed to bond the workers together, making them as independent as possible from the "outside world", to their almost paranoid secrecy (in some respects) — for example their extremely strict non-disclosure agreement.
• Try a lot of stuff and keep what works.  I believe this one needs no explanation.  In fact, Marissa Mayer, google’s VP of search and UX gave a talk at Stanford on Google’s "9 notions of innovation".  One of the points is that the numbers rule: an idea is judged better if supported by measurable evidence.
• Good enough never is.  Constantly drive for improvement; you can never declare victory, business is a continuous process.  Even if the search engine and AdSense bring in a truckload of money, Google still introduces a whole set of products which take (or will take) advantage of its strength in advertising, such as gmail, maps, youtube, and the on-line office suite.

For some of the recipes in the book I could not find equivalents in Google’s structure, but it is still a very young organization.  For example "home-grown management:" the organization should prepare its own leaders, and should be able to survive unscathed the disappearance of its charismatic founders.  (Anecdotal reports seem to indicate that Google does not like at all the idea of management, preferring a very flat organization, where a lot of the decision power is held by the engineers.)

It is not clear whether these recipes are either necessary or sufficient for creating a great company.  But I will certainly be following with interest the trajectory of Google.